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Auto parts cos likely to get leg up with upgrade fund

INDICATIONS ARE THAT IT WILL BE MODELLED ON THE TEXTILE UPGRADATION FUND
EVEN as D-Day approaches, the buzz is getting stronger that a modernisation-cum-upgrade fund for the auto components sectors is on the cards. Lately, the automobile sector is abuzz that the finance minister may introduce the fund in Budget 2008-09 to give a fillip to the domestic auto component sector which is poised for a big leap with new cars being introduced in India from domestic as well as global players.
Indications are that the fund will be modelled on the lines of the Textile Upgradation Fund (TUF), which has improved the competitiveness of the domestic textile industry, and will be offered at a much cheaper rate.
Rane Group chairman L Ganesh, whose company is a leading auto component maker in the country, told ET: “Auto component makers are largely concentrated in the small and medium sector. Therefore, they need some sort of helpline to upgrade their operations to increase their competitiveness at a time when Chinese manufacturers are aggressively dumping auto components in India. These units have limited access to capital, human resources and technology.” In addition, the Free Trade Agreements with Thailand, Singapore and other Asean countries too, are likely to emerge as a threat to the auto component industry.
In this light, the budget may not tinker with the import duty on auto components which now stands at a flat 10%. “This is unlikely to happen in this budget,” feels Mr Ganesh.
Incidentally, the size of auto-component market touched Rs 60,000 crore in 2006-07 while it is expected to touch Rs 72,000 crore in 2007-08. The sector saw imports of about Rs14,644 crore in 2006-07 which is likely to touch Rs 19,000 crore in 2007-08. Exports on the other hand was Rs 12,643 crore in 2006-07 and it may touch Rs 15,100 crore during 2007-08. “The Indian auto ancillary industry is expected to touch $40 billion by 2014,” the industry sources added.
Some of the leading multi-national companies like DaimlerChrysler, Volvo, General Motors have already announced their plans for sourcing auto components from India. A number of states in the country are also setting up auto components park. India is looking at an additional investment of Rs 60, 000 crore in the next couple of years. Therefore, the auto ancillary sector is poised to take a big leap.